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The most serious criticism of the bank's massive proposed acquisition of
is that it doesn't catapult the combined bank ahead in the lucrative business of equity underwriting. But Geoffrey Boisi, named co-head of investment banking at the combined institution, believes that Morgan Chase could be a top-three equity player in five years and has already set up a management structure to help it get there.
If Morgan Chase does manage to reach the top three, thereby qualifying as a so-called bulge-bracket firm, it'd mark a huge achievement, because, combined, the two banks currently rank sixth and have a deal total well below that of the top-five equity houses. Moreover, equity underwriting is a fiercely competitive field whose leading players show no sign of giving up turf.
Boisi, a onetime
banker who joined Chase in May, said in an interview that Morgan Chase should be able to become the No. 4 equity underwriter in five years. He added that being No. 3 "is not out of the question."
In the 12 months through Sept. 12,
J.P. Morgan Chase
, the firm's proposed new name, would've lead-managed 73 deals in the U.S. with a total value of $16.2 billion, according to
Thomson Financial Securities Data
That doesn't move the bank beyond the sixth place J.P. Morgan achieved on its own, and it's well below the top trio's total. Over the past year, meanwhile, No. 1 Goldman Sachs has done deals worth $50.6 billion, while No. 2
Morgan Stanley Dean Witter
has done $43.7 billion,
Credit Suisse First Boston
, $24.9 billion and fourth-ranked
, $24.8 billion.
Morgan Chase also won't be a much bigger player in global mergers-and-acquisition advisory. It'll rise to fourth place from Morgan's No. 7 ranking but will trail far behind Goldman, Morgan Stanley and Merrill, according to Securities Data.
More, More, More
Speaking Wednesday after a well-attended analysts' meeting in Manhattan to present the merger, Boisi also gave details of how he aims to get more equity and M&A transactions, which are generally more profitable for banks than the bond deals and corporate loans that Morgan and Chase already excel at.
Boisi points out that there isn't much overlap in the two banks' client lists, which he terms "totally complementary." As seen, both have middle-ranking equity operations in the U.S. that will get some extra scale together. But the international aspect is key, Boisi says, explaining that Morgan Chase will be able to do big deals anywhere in the world after it combines Morgan's strong operations in Europe and Japan with Chase's presence in Europe and southeast Asia, obtained after it bought
earlier this year.
Gaining a worldwide presence was one of the most important criteria in Chase's mind when it was sizing up Morgan, Boisi says. In fact, he says, the lack of global scale turned Chase from pursuing an acquisition of
Donaldson Lufkin & Jenrette
, the New York investment bank that is being acquired by Credit Suisse. "There's no question we looked at DLJ. But J.P. Morgan gives us much more power on a global scale," he explains.
Organizationally, Boisi's investment banking operations will group 25 industry sectors into four global groups. They will be led by Dan Case, Mark Davis, both ex-Chase, and Ned Kelly and Jacques Aigrain, from Morgan. Case, previously head of
Hambrecht & Quist
, the tech-focused bank that Chase bought last year, will be in charge of corporate clients in the New Economy sectors, while Kelly will concentrate on financial services companies.
A number of investors would've preferred that Chase buy a firm that had a bigger equities business, like Merrill Lynch or Morgan Stanley, for example. Morgan is seen as a second-best deal for Chase. However, Boisi, who entered Chase's top ranks after it bought his investment bank boutique, the
, appears extremely determined to make the merger work.
For example, he makes it clear that Morgan Chase isn't going to rely solely on synergies and restructuring to bring in more deals and higher investment banking revenue. Boisi implies he still has a big checkbook to recruit from outside Morgan or Chase. One source of new people could be DLJ. "We could hire anyone we want from DLJ. We get calls all the time," he claims.
Curious to know how the cultures of Chase and Morgan might mix? There was a telling scene at the well-attended analysts' meeting, held Wednesday in the basement auditorium of the
building in midtown Manhattan.
The din in the room subsided as Morgan's chairman, the stolid Sandy Warner, moved onstage to give the opening address to a crowd of at least 200. There was some movement in the front row of seats, which had been reserved for top Chase and Morgan execs. All of a sudden, Chase's vivacious chief financial officer, Dina Dublon, moved from the front row, where she'd been sitting with a bunch of Chase colleagues, to the second row. There she inserted herself amid four Morgan execs, one of whom was Ramon de Oliveira, who is being made head of Morgan Chase's huge asset management business. Her reason? "That was looking too much like a Chase row, so I am moving here," she said as she sat down among the Morgan bankers, all of whom were too inscrutable -- in that famed J.P. Morgan manner -- to register her presence.
If this was a tense wedding, where the marrying couple's families hardly know each other, Dublon was the friendly aunt who decided, after a drink or two, to approach her new relatives in the hope of making friends. Having failed the first time, she made another overture five minutes later, as Warner's speech dragged on. She offered the Morgan chaps a piece of candy. They refused, hardly turning their heads to her as they did so. Next up was Chase's CEO William Harrison, the proposed chief exec of Morgan Chase, and, of course, the Morgan boys' new boss. Unlike Warner, Harrison ad-libbed a bit and even made a couple of jokes. Dublon laughed heartily and looked to her new colleagues for a connection. Nothing.
It's hard to believe that Morgan's top bankers were so livid about selling out that they were freezing out the charming Dublon. But it sure looked that way. Here's to a happy marriage.